Inquiry highlights procurement governance gaps

From the February 2021 print edition

In his recent Transparency and the Public Trust: Report of the Collingwood Judicial Inquiry, Ontario Associate Chief Justice Frank N. Marrocco found serious procurement irregularities in two controversial transactions at the Town of Collingwood. The report calls for widespread public procurement reforms across the municipal sector and serves as a wakeup call for senior officials across all government institutions.

By way of background, the report focuses on the actions of the Town’s deputy mayor, mayor’s brother, and the Town’s executive director (who oversaw the Town’s electric utility) in relation to two controversial transactions. The report found major irregularities in the Town’s sale of 50 per cent of its electric utility through a tainted RFP process, and in the Town’s subsequent sole-source award of a construction contract for a new recreational facility. In the report, Justice Marrocco concludes that both transactions were tainted by undisclosed conflicts, unfair bidding practices, and a lack of transparency, which undermined public confidence in the municipality’s governance and underscored the need for system-wide reforms in municipal procurement.

At the provincial level, Justice Marrocco calls for an amendment to Ontario’s Municipal Act to remove reference to the mayor serving as the “chief executive officer” of the municipality since that provision improperly implies that a mayor has the same authority to bind a municipality that a chief executive officer (CEO) has to bind a business corporation. As Justice Marrocco explains, the role and authority of a mayor is far more limited and does not include the power to make unilateral decisions on behalf of municipal council or to directly instruct municipal staff on behalf of municipal council.

As the report clarifies, rather than serving as CEO, a municipal mayor can more accurately be described as the chair of the municipality’s board of directors, with the council serving as the board, and the municipality’s chief administrative officer, not its mayor, serving a role similar to the CEO of a business corporation. To further clarify these roles, Justice Marrocco recommends that the Municipal Act be amended to confirm that municipal councils must act as a whole, and that no single member of council has the authority to act on behalf of or to bind the municipality.

Justice Marrocco also calls for reforms to the provincial Municipal Conflict of Interest Act to expand the definition of conflict to include common-law partners, stepparents, stepchildren and in-laws. He advises that provincial law should require all members of municipal council to provide proactive disclosures of their financial interests to better identify future conflicts of interest.

The report also calls for a series of statutory and administrative reforms at the municipal level, including bylaw amendments and the implementation of detailed codes of conduct to define the roles and responsibilities of the mayor, council, chief administrative officer and municipal staff. More specifically, the report recommends that municipal bylaws be amended to “state that there must be a distinct separation between the administrative role of the chief administrative officer and the political role of the mayor and council members.” Justice Marrocco also recommends the implementation of safeguards to prevent the manipulation of information provided by staff to municipal councils, noting that external reports that are relied on to support council decisions should be provided to all council in complete form and should not be altered or disclosed in a selective manner to individual council members.

Justice Marrocco also emphasizes the importance of procurement-related process reforms and training. As his report confirms, open tendering should be the norm in the award of municipal contracts, and non-competed direct awards should be strictly regulated so that, among other things, the lack of planning and self-created emergencies are not relied on as sole-sourcing justifications. More specifically, the report states that municipalities should bolster their project planning and governance, enhance their debriefing practices, implement municipal supplier complaint procedures and provide procurement staff with regular mandatory training on procurement bylaws, policies and practices and related conflict and ethics issues. Finally, the report recommends that municipalities retain external legal advisors to assist with their complex procurements.

By highlighting the systemic procurement governance gaps in the Ontario municipal sector, Justice Marrocco’s report serves notice to senior public officials across all government institutions. Those who are entrusted with serving the public interest should prioritize the implementation of proper governance practices or risk serving as the next high-profile procurement case study.

This article is extracted from the new 2021 edition of Paul emanuelli’s book, The Art of Tender­ing: A Global Due Diligence Guide.

Paul Emanuelli is the general council of the Procurement Law office. Paul can be reached at [email protected].